Indigo is one of the oldest dyes manufactured chemically and is mostly used in textile, food, and pharmaceutical industries. However, owing to the environmental hazards posed by the chemical production, the present scenario in the field stipulates a biosynthesis alternative for indigo production. The present study describes an indigenously isolated naphthalene-degrading strain Pseudomonas sp. HOB1 producing a blue pigment when indole was added in the growth medium. This blue pigment was analyzed by high-pressure thin-layer chromatography and other spectroscopic techniques which revealed it to be the indigo dye. Pseudomonas sp. HOB1 showed ability to produce 246 mg indigo liter(-1) of the medium. The K (m) for the enzyme naphthalene dioxygenase which is involved in indigo formation is 0.3 mM, and V (max) was as high as 50 nmol min(-1) mg dry biomass(-1). The bacterial indigo dye was further successfully applied for dyeing cotton fabrics. The high indigo productivity of Pseudomonas sp. HOB1 using naphthalene as growth substrate and its applicability on cotton fabrics, therefore, stems the probability of using this culture for commercial indigo production.